Australian Prime Minister Julia Gillard has announced a royal commission to investigate decades of child abuse in churches, schools and foster homes.

Gillard said the commission would address "institutional responses to child abuse" - the instances of abuse as well as the manner in which they have been dealt - by a range of institutions.

She said she would work in coming weeks with Attorney General Nicola Roxon to define the terms of reference, but said she imagined the investigation would go back decades.

The announcement follows calls by the Greens and some Labor backbenchers for a royal commission into abuse in the Catholic Church, after it was alleged by a senior policeman that investigations were hindered and in some cases compromised by church officials.

But Gillard said the inquiry would not be limited to the Catholic Church but would include churches, schools, foster homes, state services, police forces, sand the not-for-profit sector.

"The allegations that have come to light recently about child sexual abuse have been heartbreaking," Gillard said.

"These are insidious, evil acts to which no child should be subject. The individuals concerned deserve the most thorough of investigations into the wrongs that have been committed against them.

"They deserve to have their voices heard and their claims investigated. I believe a royal commission is the best way to do this."

Opposition Leader Tony Abbott had earlier given his backing to a royal commission, provided it was not limited to the Catholic Church.

"Any investigation must be wide-ranging, must consider any evidence of the abuse of children in Australia, and should not be limited to examination of any one institution. It must include all organisations, government and non-government, where there is evidence of sexual abuse."

Gillard said terms of reference and a proposed commissioner would be submitted soon to Governor-General Quentin Bryce, who has the power to establish the commission.

She said she had the backing of her Cabinet. She will speak in coming days to state premiers about co-ordinating with any existing inquiries.

"Discussions will also take place with victims’ groups, religious leaders, and community organisations."